How is a stock trade executed?

It doesn't happen instantly


Hemant here. As I see more and more of stock trading around myself, over the last few weeks, I'm trying to better understand what actually happens when we trade stocks.

Nowadays, buying and selling shares is as easy as clicking a few buttons on your phone. But what takes place behind the scenes after you click those buttons on your phone? For someone who sells shares, who finds the buyer? And what processes ensure that the buyers pay the seller the money, and don't just run away?

To answer these questions, I decided to understand what happens when shares are traded.

The scenario we'll try to decode today is simple - a BUYER wants to buy shares of a company, and a SELLER wants to sell the shares of the same company.

To understand what happens, let's start with understanding who all are involved during the transaction.

Parties involved in a stock trade

  1. Buyer = the person who wants to buy shares of a company

  2. Seller = the person who wants to sell shares of a company

  3. Stock broker = The middleman responsible to coordinate transactions with a stock exchange on behalf of the buyer or the seller.

  4. The stock exchange = The place where the buyer meets the seller. Examples of stock exchanges are the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).

  5. Clearing corporation = Each stock exchange has their own clearing house; which is responsible for ensuring the trade actually happens: that the buyer gets the share certificates, and the seller gets their money.

  6. Depositories = think of these like banks. They are responsible for holding your shares. The 2 most depositories available in India are NSDL and CDSL.

Let's buy some shares

One day, our buyer finds that a stock is heavily undervalued and its price would go up in the coming week. Hence, she decides to buy a 100 shares at the current market price.

She goes to her broker's terminal via her phone. There, she sees a few options to choose from:

  1. Type of trade:

    1. Delivery: You select delivery when you are not going to sell the share on the same day.

    2. Intraday: When you want to buy and sell a stock on the same day.

Because she suspects the price would increase over a week, and partly because she doesn't have the patience to buy and sell on the same day, she decides to place a "delivery" order.

She sees that the price of the stock is Rs. 99. Now she has two options for the price:

  1. Price:

    1. Market: She could pay the current market price

    2. Limit: She could decide to offer a price of her own.

Let's say her research suggests that the price is going to go up to Rs. 150 in the coming week. So, she is ready to pay a higher amount if needed.

She decides to place a "limit" order at Rs 105.

  1. Quantity: She decides to buy a 100 shares.

Once she presses the "BUY" button on her phone and the order is placed, several pieces get into motion.

The process of buying shares

On the day she presses the BUY button, let's say day T, a few things happen:

  1. Her broker deducts the money from her bank account and puts the money into the broker's account.

  2. The broker sends the order to the stock exchange, let's say NSE. NSE is responsible for finding a matching seller for her. It uses an electronic matching system to find a seller. The principle is to match the costliest buy price with the cheapest sell price available at that moment.

Let's say NSE is able to find a seller who can sell the shares at Rs. 105 for our buyer. Tadaa, the trade is executed.

On the next day, T+1:

The broker doesn't know who the buyer bought the shares from. This is where the clearing houses come in. NSE has a clearing house called NSE Clearing Ltd., which is responsible for letting the brokers know this information.

  1. Basically, NSE Clearing would tell our buyer's broker that she bought a 100 shares from another person, the seller.

  2. The money that her broker held, is transferred to a "clearing bank account," an account that a broker holds for sending money to sellers. We'll call this the buyer's broker's account for simplicity.

On the next day, T+2:

  1. The money goes from the buyer's broker's account, as mentioned above, into the seller's broker's account.

  2. The money goes from the seller's broker account to the seller.

Buying of the share is finally completed. She now owns a 100 shares!

Selling shares

4 days later, she proudly smiles looking at a stock chart on her phone. The latest price has shot up to Rs. 160, beating her expectations. But her analysis suggests that from here on, the price is going to decline again.

Thus, she decides to sell.

So, she clicks on the stock's name on her phone, and finds the SELL button. She decides to sell all the shares at the market price.

Again, the T+2 cycle kicks in.

On day T, when she presses the SELL button:

  1. shares are deducted from her demat account, and sent to her broker's account.

  2. NSE will once again find a buyer for her shares.

On day T+1:

  1. NSE Clearing Ltd. will tell her broker's account where the shares have to be sent to.

  2. The shares go from her broker's account to the broker's depository account. Every broker has to have an account with one of NSDL and CDSL. Let's call this the broker's pool account.

On day T+2:

  1. The shares go from her broker's pool account, to the buyer's broker's pool account.

  2. The shares are routed from the pool account to the demat account of the buyer.

Finally, she can boast about the massive returns she has made.

As I learnt this process, the one question that has been ringing in my mind is why it takes 2 days for trades to settle. Why can't it all be instantaneous? With the technological advances we have around us, it should be possible to do with a high level of reliability.

Does anyone know why this is the case? I'd love to learn.


  1. What is T+2 Settlement - video

  2. The role of CDSL and NSDL - link

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💉How were the COVID vaccines developed so fast?

Let's look at a few vaccines


Hemant here. Across the world, governments are racing to vaccinate their entire populations against COVID-19.

That we have so many vaccines developed under a year is a remarkable feat. Typically, vaccine development take multiple years and even decades in some cases.

So what was different this time? How did we end up going from no vaccines to so many vaccines in under a year?

In today’s essay, I will write about 3 vaccines - the Pfizer-BioNTech vaccine, the Moderna vaccine, and the Oxford-Astrazeneca vaccine.

But before that —

How are vaccines typically developed?

The way vaccines work is simple - you inject a weakened or dead strain of a virus into your body, and your body cells create antibodies that defend you against the actual virus.

However, mass-scale vaccine production is a long process.

Before creating a vaccine, you first need to isolate dead or weakened strains. Then, you need to find a way to replicate them. Then, you need to actually test if these vaccines work. Typically, trials are done in animals first (eg: mice) before human subjects.

Based on the results seen in trials, vaccines need to be improved to ensure that there are zero to minimal side effects on humans. Also, they should be applicable to many segments of the population. Most importantly, they should be able to immobilize the virus they are meant to.

So, what was different about COVID?

The biggest motivation to find a working vaccine was: we were in the middle of a pandemic and the world economy had come to a standstill.

Someone needed to act!

Which meant - government and private bodies across the world showed a willingness to throw away money on research, and corporations stepped up to increase production before even a single vaccine was approved.

At the same time, because COVID was widespread, scientists were able to recruit enough candidates for their trials, which resulted in faster trials and conclusions.

But none of the above would have mattered if we did not have the technology to create a vaccine so fast.

It is the result of multiple decades of scientific innovation that scientists are now able to create vaccines in a matter of months as compared to years.

What is this scientific innovation?

Vaccines across the word were developed using different techniques. But the story of the ones developed by Pfizer and Moderna is fascinating.

mRNA technology

If you remember high-school biology, you might have heard the terms DNA and RNA. DNA stands for DeoxyRibonucleic Acid, and RNA for Ribonucleic acid.

Feel free to ignore the complicated words above.

Here’s how they work —

RNA is responsible for making proteins in our cells, which are what help cells perform any kind of an activity. Whenever our DNA (which contains the blueprint of a cell), wants to create a certain type of a protein, it activates a portion of the DNA which contains the "recipe" for creating these proteins.

This creates multiple copies of that piece of DNA, and is called messenger RNA (mRNA, in short). These copies of mRNA are then used to create proteins.

What would happen if we were able to artificially create mRNA that could instruct our body to produce certain types of proteins?

This is exactly how mRNA vaccines work.

Doctors inject certain mRNA into our body that instructs our cells to create proteins similar to the proteins found in the actual coronavirus. Since our body is smart, it produces antibodies against these. So when the actual coronavirus says Hi, we can Bye-bye it at once. 👋👋

History of mRNA

The above idea sounds simple, but in reality, it took 3 decades to prove that it had real applications that worked!

The original scientist working on this - Katalin Karikó, spent the 1990s collecting rejections for her grant proposals to work on this technology.

While in theory, the concept was fine, in practice, our body acted against this artificially induced mRNA. Basically, our body sensed an intruder, and acted to defend itself against it.

In fact, in 1995, she got demoted since her work was not seeing any acceptances. But she persisted with it. With the aid of another professor, she was able to create a hybrid mRNA that could sneak its way into the body's cells without triggering our defense mechanisms.

These findings were published in a scientific journal in 2005. While the research papers didn't catch the eyes of many initially, a few key scientists at Stanford University noticed. These scientists started to use the mRNA technology to create stem cells that could be used to cure many kinds of illnesses - from Parkinson's to spinal cord injuries.

These scientists then collaborated to create a new biotechnology firm, based on their mRNA research. The firm's name is one that you might have heard of - Moderna, which was a combination of "modified RNA".

But other scientists across the world were also starting to notice. Another company, called BioNTech, was born to explore the potential of this mRNA technology.

But formation of companies was the easier part. Getting products approved by regulatory authorities was hard. Just as an example, as of November 2020, BioNTech had 13 compounds in clinical trials for many illnesses, but none of them was approved for production and general use.

That was, until COVID-19 was discovered.

After the virus was discovered in China in December 2019, scientists isolated the genetic code of the vius and posted it online in January 2020. And because the mRNA technology doesn't need the actual deactivated/dead virus to create a vaccine, scientists at both Moderna and BioNTech got started!

Within 42 days of isolating the genetic code, scientists at Moderna managed to create a compound that could deactivate the virus and prevent it from spreading.

While Moderna cruized on its own, BioNTech partnered with Pfizer for mass-scale production of their vaccine.

Both the companies launched their vaccines in broadly a similar timeframe.

The mRNA technology is a gamechanger for the world - it has the potential to not only create vaccines faster, but even cure genetic diseases that don't have a cure yet.

What about other vaccines?

While mRNA was a gamechanger, in another part of the world, scientists at the Oxford University were also able to create a vaccine in record time.

The Ebola Outbreak of 2014-2016 had scientists wondering what to do when the next deadly virus struck. Experts across the world had predicted that we weren’t prepared for a pandemic caused by an unknown coronavirus.

Thus, they had been working on creating technologies that could help produce vaccines much faster.

At the Oxford University, scientists were able to create a "plug-and-play" system, where they took one virus, and engineered it to become a building block of a vaccine against another.

In the case of COVID, scientists used a common cold virus that infected Chimpanzees and tweaked it using the strands isolated from the COVID-19 virus when it was detected. The virus affecting the chimpanzees was also genetically modified to prevent any adverse effects on humans.

Now, when they found the genetic code of the Coronavirus, this "plug-and-play" method of creating vaccines helped.

This resulted in the creation of the Oxford-Astrazeneca vaccine, commonly known as Covishield in India.

In conclusion

The story of mRNA is a testament to the fact that good things could take decades to take shape. The “plug-and-play” system developed at Oxford also provides us with a way to create vaccines rapidly and at scale.

We can’t thank the scientists working on these innovations enough!


  1. The story of mRNA: From a loose idea to a tool that may help curb Covid (

  2. What is RNA (

  3. Read more about the Oxford-Astrazeneca vaccine

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How did they make ice cream before refrigerators?

And the history of ice cream


Hemant here. Technology, migration and explorations have tremendously changed what we eat. Today’s essay is an example of how.

Ice cream is one of the most wonderful human creations. Today, ice cream is a $66 bn industry, and is still growing. But when it started spreading around the world, it wasn't meant for everyone to consume.

It was considered a royalty, until some enterprising individuals decided to make it available for the masses, very much similar to the history of sugar.

So, what does the history of ice cream look like? And how exactly did they make ice cream before refrigerators existed?

Let's check it out...

The origins of ice cream

Like almost every other food on the planet, there is no single person who invented ice cream. However, we see that back in 200 B.C., people in China had started creating a dish of rice and milk, which they froze by packing in snow.

Tadaa - the earliest variant of ice cream was born. How they arrived at this combination seems like a result of a lot of hit and trial. Most food we eat today has evolved over decades, if not centuries. Ice cream is no different in that regard.

The Chinese kings started filling pots with milk and syrups, and placing them in the snow in order to freeze them.

It is also known that the rulers around this time indulged in desserts of snow. Alexander the Great enjoyed eating snow flavoured with honey.

But, these desserts were restricted to the royalty. Ice cream was not a widely known product yet.

Spreading across the world

And then came the time of the European explorers. Some sources suggest Marco Polo brought back ice cream recipes from China to Italy. However, this could be a made-up story.

Nevertheless, the point being, ice cream travelled to Europe, where it became a desert for the royalty. These royal people frequently hosted other kings and queens, and with a thing like ice cream, it was obvious that things would spread!

And yet, it is alleged that some of the royalty tried to keep the ice cream recipe a secret!

But good things eventually spread in the world. And so did ice cream. Cafe Procope in France started serving Ice Cream to the general public in the late 17th century. They made this ice cream using milk, cream, butter and eggs.

And then, ice cream arrived in America. The earliest known mention of Ice Cream in America is in 1744. And the American elite loved the delicacy. President George Washington is known to have spent $200 (about $3000 today) in 1790 alone on Ice Cream!

Then America, being America, started commercializing the product like anything.

However, there was still a big problem. Refrigerators didn't exist. So production was slow, and consumption had to be quick, otherwise:

This changed when in 1870, Germany invented industrial refrigeration. And it had a catalytic effect on the industry. Then came the invention of cones, hundreds of flavours and varieties of ice creams, and so on.

Long live ice creams!

In another part of the world

Europe and America were not the only places where ice-cream was created and consumed. In the 16th century, "kulfi" started becoming popular in India.

The word Kulfi is derived from Farsi. Kulfi means "covered up". Flavoured with pistachios, saffron, and other dry fruits, Kulfi was usually surved in small matkas which would allow it to be stored for longer and prevent it from melting.

But in India, especially in Delhi, where the rulers had their capital, there was no snow to freeze ice cream. So how did they make ice cream in the sweltering Delhi heat? Some sources suggest they transported Himalayan ice to warmer regions, but I don't believe that would have been enough.

But they knew how to freeze ice cream.

Okay, back to chemistry. How is ice cream frozen?

The basic idea of how ice cream has remained the same over the years.

You fill up a bucket full of ice, then place a pot of cream, sugar and whatever flavour of ice cream you want. Then you add some salt to the ice. Let the magic happen!

What actually happens in this process?

Salt, as you might know, lowers the freezing temperature of ice. This is also the reason why salt is poured over snow-covered streets in the winter.

Now, because the freezing point of ice is lowered, it needs energy to melt.

And where does it get that energy from? Surprise, surprise! From our pot sitting in the middle. It starts sucking out the heat from the pot, resulting in the pot and its content cooling down (and freezing) while the ice outside starts melting - however, the melting is very slow.

And you can use this same process to make more ice, so once you have some supply of ice, you can continue to make ice and ice cream.

This principle was the primary way in which ice cream was made, until the advent of refrigerators.

Earlier on, "saltpeter" was used instead of salt to freeze Kulfi. At the time, saltpeter was used for making fireworks and gunpowder. It is likely that someone stumbled upon its freezing properties.


  1. The History of Ice Cream (

  2. The story of Kulfi - STORY OF THE KULFI (

  3. Saltpeter for making ice cream - How Did They Make Ice Cream in the 17th Century? (

Thank you for reading

The history of things around us can sometimes be fascinating, and if you have friends who would love to learn about these with me, do share this with them.

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#50: A sport that relies on technological innovation

Formula One - where every micro-second counts.


Hemant here. Through this email, my goal has been to reflect on how technology is affecting our lives - both at a macro and a micro level.

Today’s essay is a good one, and it sticks to the theme very much.

I’m going to talk about one of my favourite sports in this world - Formula One. Though the sport gets a name for being a “rich man’s sport,” I think this image tends to belie the decades of technological progress we’ve made in automotive technology, which has made the world a safer place to live in.

Let us begin…

What exactly is Formula One?

In a nutshell, Formula One is a car racing championship, where 10 teams compete every year for the World Championship. Cars drive fast, like this —

Each race lasts about 2 hours of total time, preceded by many many hours of preparation and years of training. In short, it is like any other worldwide sport - you train for years and prepare for matches lasting a few hours.

The “Formula” in Formula 1 stands for a series of rules that all participants have to adhere to. These rules are decided by a governing body called FIA, which creates rules not just for F1, but also for Formula 2 and many other racing championships.

The first F1 championship was held in 1950, and was originally dominated in Europe. The FIA in the recent decades has made a concerted effort to take the sport global, and now races are held across the world.

Alright, so what’s different?

Let’s look at some facts —

  1. Today, the cars can have a top speed of about 325 kmph.

  2. Cars can go from 0-150kmph and back in less than 4 seconds.

  3. Drivers can lose up to 6kgs in a single race! Wait, what?

  4. Team yearly budgets run upwards of $100 million, with several teams spending more than $400 million dollars every year.

  5. Depending on the tyres used, a car can’t go for more than 30-40 laps (1 lap = around 5 to 6 km, depending on the track). Cars often have to take a pit stop to change their tyres.

  6. Micro-seconds count. A driver can take 1/1000th of a second more than another driver, and thus be judged to be behind the other driver.

And what about the drivers?

Well, they are incredible athletes to say the least. Unlike driving a normal car, here’s some things they experience:

  1. While turning and braking, the G-force they experience can be 4 to 5G. This is basically 4 to 5 times the regular gravitational force of the earth. This is similar to the G-force experienced by flight pilots who do rapid somersaults. These G-forces can make you faint if you’re not trained to handle them. F1 drivers have to specifically train to ensure they can handle such stress on their bodies.

  2. A single lap could have 19-20 turns, which means that every second, you might be turning your car in a different direction, while decreasing your speed from 300 kmph to 100 kmph, while also looking around to make sure no one is overtaking you, and also trying to communicate with your team about your car’s status. Well, talk about peak performance…

  3. The drivers also have to juggle a lot of moving parts in their cars. Take a look at the steering wheel itself. There are so many buttons and knobs on it that you have to click on within seconds that mistakes are easy to make, unless you are hyper-focused.

    1. Not to mention the biggest risk these drivers face - that of losing their lives. A single wrong push of the pedal or cranking of the steering wheel could crash your car. Over the years, several people have died driving an F1 car.

😱That seems like a lot of risk.

It is. In the second last race of the 2020 season, Romain Grosjean’s car pierced through the barricades and went beyond the racing track limits, before bursting into flames. While several people had started to lose hope, like a phoenix, Romain walked out of the burning fire and towards an ambulance waiting for him.

Thanks in part to the decades of innovation in safety - the fire suits, the design of F1 cars that minimizes impact on the driver, the design of the circuits to ensure that other drivers are safe, the hundreds of safety protocols, and of course, sheer luck!

Check out this video to see the miraculous escape.

But the game goes on, just like life! Over the decades, FIA has heavily invested in making the sport a lot more safer. A recent example is the halo design on top of the cockpit, which prevents drivers from damaging themselves. It is suggested that the halo played a major role in saving Romain Grosjean’s life as well.

Why is F1 called a team sport?

Just like every car has tens of thousands of moving parts, a driver cannot win without the adequate support of his team.

During a race, there is a lot more going on behind the scenes while the driver is trying to win. For example - there are people monitoring data about how the car is behaving, some who are observing the competitors and optimizing their strategy, and so on.

Drivers also often have to pit during a race. Nowadays, pit stops last 2 seconds and are a key part of racing strategy for any team. Take longer than that, you lose your spot. Avoid a pit stop, and you might gain a few spots. Of course, this is easier said than done. There are several variables at play here.

Let’s take an example of how things could fail. In the 2021 Monaco Grand Prix, Valteri Bottas was driving in the second place when his team decided to change the car’s tyres. He drove into the pit lane.

But guess what happened?

One of the guns that unscrews the tyre from the axle got jammed! As a result, the existing tyre could not be removed from the car, as Bottas helplessly watched towards his pit crew trying to remove the tyre.

In the end — Bottas had to end his race. Quite a bad result for someone who was in the second spot and had a real chance of winning the race!

Technological innovation aided by sport

You might have guessed by now that the sport requires a lot of technological innovation by the teams in order to win races. This, in fact, improves our cars on the road.

Let’s take a few examples —

  1. KERS (Kinetic Energy Recovery System) — introduced in the late 2010s, this system allowed the energy generated from braking to be stored and reused to give the cars an additional push when they had to overtake. Today, this same system is used in a lot of hybrid cars and buses, which helps make our cities greener.

  2. Data transmission and monitoring — Public transportation has also seen benefits of innovation coming from Formula One. Singapore’s Mass Rapid Transit system now uses sensors and data tools that once were introduced in Formula One.

  3. Innovation in materials — The innovations in aerodynamics and materials engineering have found their way to other sports like cycling and sailing, where aerodynamics play a huge part in improving performance.

In conclusion…

Humans are motivated by games and competition. By adding technology as a key requirement for playing these games, F1 has helped us make some serious technological prowess.

A lot has happened and a lot is yet to be seen, but as I write this essay, my love for the sport has only grown!

I am once again (unrealistically) dreaming of the day I get to drive an F-1 car…😉

Want to learn more about F1?

  1. A newbie’s guide to Formula One - A good article that will help you know all you need to if you want to start following the sport.

  2. Formula 1 - Drive to Survive: An excellent docuseries by Netflix covering the behind-the-scenes of Formula One.

  3. Formula 1 official site: Look through the history of Formula One, its technology, and everything else.

Was this essay useful to you? Do share your feedback by replying to this e-mail.

Thanks for reading :)


#49: The darker side of cryptocurrencies

Book notes - American Kingpin & the nefarious uses of cryptocurrency, and more


Hemant here.

Mark Twain famously quoted —

Truth is stranger than fiction, but it is because fiction is obliged to stick to possibilities, truth isn’t.

In other words, fiction has to always make sense, but truth doesn’t. This is one of the biggest paradoxes in life. When we create stories, they have to be logical, otherwise, they don’t stick very well. But the truth is usually a series of random events.

Last week, I found a good example where actually a non-fiction book was just as good as a fiction book. While reading the book, I kept thinking about the quote above. I wondered whether the book was actually non-fiction or whether it was the truth!

But I was convinced that it was the truth when the author listed all his research materials and artifacts towards the end of the book.

The book I’m writing about is American Kingpin by Nick Bilton —

In the last decade, cryptocurrencies have been touted as the future of how currencies work. Their lack of dependence on governments, but on computers, makes them much more reliable.

Yet, there are some big problems with them (at least right now). The privacy makes it near impossible to trace who actually owns what, even though all the transactions that happened are available on a publically viewable ledger.

And thus, they can be used for any number of nefarious purposes.

Then there is the concept of The Dark Web, which basically means websites that are hidden from the view of search engines like Google. This portion of the web also keeps you hidden from governments and security agencies, which means you can be free to do what you want.

This is exactly what Ross Ulbricht, founder of The Silk Road did. He created an e-commerce portal for drugs and later expanded it to guns. People could easily buy and sell drugs, and pay each other using bitcoin. The site grew like anything, making Ross a millionaire within months of starting it.

Of course, wouldn’t the governmental agencies be irked?

The book follows the story of officers of different governmental agencies, the FBI, the DEA, and the US Customs department trying to nab Ross for operating the Silk Road.

Ultimately, what was thought to be impenetrable was given away by a series of errors made by Ross.

If you like reading Crime thrillers, do check the book out.

Other things I came across…

  1. The Value of time: One of the biggest truths of adulthood is the need to manage your time. Between work, friendships, relationships, and our passions, we are trying to juggle a lot already. So, how do you allocate your time so that you reduce wastage? In this essay, James Clear suggests a technique to calculate the value of an hour you spend. Based on this, you can determine whether you should do it yourself, or pay someone to do the work. For example: if the value of your time is ₹1000, James suggests that you should pay ₹500 for something that takes more than half an hour.

    Though I have my reservations about measuring time spent this way, this article is certainly thought-provoking. Do check it out!

  2. Blogging his way to $9mn in cash — I recently heard this podcast episode, where a non-writer, non-blogger started a blog in a subject he had no expertise around: daily soaps on TV. He claims to have never seen a single daily soap episode. And guess what, not only he started it, but he was also able to sell it for nearly $9mn! This is another story that shows the power of the internet.

That’s it for today!

What did you think of this email? Do let me know if you like it, or even if you don’t.

Thanks for reading :)


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